Case Law Details

Case Name : Commissioner of Income Tax Vs M/s. The Asian Marketing (Rajasthan High Court at Jaipur)
Appeal Number : D.B. Income Tax Appeal No.275/2010
Date of Judgement/Order : 11/04/2012
Related Assessment Year :

The only dispute by the Revenue is that the amount of remuneration has not been quantified in the partnership deed. It is mentioned in clause 8 of the partnership deed that remuneration will be payable as per norms fixed by the relevant provisions of the Income-tax Act. Thus the quantification of the remuneration is apparent from the clause 8 of the partnership deed.

The requirement in law is that remuneration should have been authorized and the amount of remuneration shall not exceed the amount as mentioned in sub-clause (v) of Section 40 (b) of the Act. The relevant provisions has used the word ‘authorised’ and not the word used ‘quantify’. The ITAT Pune Bench in the case of ACIT Vs. Suman Construction 43 SOT 495 held that remuneration is to be deducted in case partnership deed authorizes the payment of salary. We have also considered the decisions which have been mentioned by the ld. CIT (A) in his order. We, therefore, feel that the ld. CIT (A) was justified in allowing the remuneration payable to the partners.

HIGH COURT OF RAJASTHAN AT JAIPUR

D.B. Income Tax Appeal No.275/2010

Commissioner of Income Tax

vs.

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M/s. The Asian Marketing

DATE : 11th April, 2012

J U D G M E N T

Heard learned counsel for appellant.

2. The remuneration, payable to partners, was disallowed by Assessing Officer, however, on an appeal, the Appellate Authority set aside the order of Assessing Officer. The order of Appellate Authority i.e. Commissioner of Income Tax (Appeals)-II, Jaipur, has been affirmed by the Income Tax Appellate Tribunal, Jaipur Bench ‘B’, Jaipur. The finding of Tribunal reads as under :-

“4. We have heard the ld. DR and considered the written submission filed by the ld. AR . Section 40(b) (v) specifies that remuneration is to be authorized by partnership deed to a working parter. The working partner has been defined in explanation 4 opportunity Section 40(b). It is not disputed that remuneration paid is to the working partners. Clause 8 of the partnership deed relates to the entitlement of remuneration to the to the partners. The relevant clause is reproduced as under :-

“8. That both the parties, that is, the party of the First Part and the party of the Second Part will be actively engaged in the business of th epsf and wil be the working partners and as working partners will be entitled for remuneration / salary which will be paid to them according to the standards and norms fixed by the relevant provisons of the Income Tax Act, 1961. The remuneration/ salary so admissible will be paid / credited to their account provided that such remuneration / salary can be increased / decreased as per  mutual agreement as the partners mutually decide to be adjusted at the end of the year as per the relevant of the Income-tax Act, 1961. The excess amount so paid/credited, if any, would be debited / credited to their capital account.”

This partnership deed has authorized the remuneration to be payable to the partner. The only dispute by the Revenue is that the amount of remuneration has not been quantified in the partnership deed. It is mentioned in clause 8 of the partnership deed that remuneration will be payable as per norms fixed by the relevant provisions of the Income-tax Act. Thus the quantification of the remuneration is apparent from the clause 8 of the partnership deed. The requirement in law is that remuneration should have been authorized and the amount of remuneration shall not exceed the amount as mentioned in sub-clause (v) of Section 40 (b) of the Act. The relevant provisions has used the word ‘authorised’ and not the word used ‘quantify’. The ITAT Pune Bench in the case of ACIT Vs. Suman Construction 43 SOT 495 held that remuneration is to be deducted in case partnership deed authorizes the payment of salary. We have also considered the decisions which have been mentioned by the ld. CIT (A) in his order. We, therefore, feel that the ld. CIT (A) was justified in allowing the remuneration payable to the partners. Before parting with this appeal, we would like to state that the remuneration receivable by the partners is taxable in their hands and it is not the case of the Revenue that the assessee has claimed remuneration to the working partners to avoid tax. It is true that tax payable in the hands of the individual may be 30% while interest in the hands of the firm may be 35%. Thus tax effect is not substantial. Hence, Ground No.1 and 2 of the Revenue are dismissed.”

3. The question of payment of remuneration is a question of fact and finding in this regard is based on clause 8 of the partnership deed. Clause 8 was also quoted and considered in the order of Tribunal. Therefore finding in this regard is a finding of fact. There is a concurrent finding of fact recorded by Appellate Authority as well as Appellate Tribunal, which cannot be interfered with by this Court.

4. After considering submissions of learned counsel for appellant and the finding of the learned Tribunal, we are of the view that no substantial question of law is involved in the  present appeal. There is a concurrent finding of fact by both the Courts below based on relevant clause of partnership deed itself. Since, no substantial question of law is involved, hence, appeal is dismissed in limine.

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